Want to impress Wall St.? Cut and shrink

The nine companies expected to shrink their revenue the most this year, by more than 10%, are being enriched with market-beating gains.

Companies including tech consultant Computer Science Corp., tech parts maker Jabil Circuit and drug maker Eli Lilly, are among the nine in the Standard & Poor’s 500 expected to the biggest percentage drops in revenue this year, according to USA TODAY analysis of data from S&P Capital IQ, excluding financials. As a group these stocks, on average, are up 3.4% while the S&P 500 is up just 0.75%.

The fact companies are being rewarded this year for being reporting big drops in expected revenue falls in the face of the idea that investors are seeking companies in growth mode. In fact, shares of all but one of the nine companies expected to shrink this year are up. Shares of drugmaker Vertex Pharmaceuticals are down 13.5% this year, as the entire biotech has been under pressure this year.

Eventually, though, such cutting seems to catch up with companies. There are 40 companies in the S&P 500 that are expected to post lower revenue this year then they did five years ago. These stocks are up 32%, which is about half the S&P 500’s increase during the same period.

Keep in mind that revenue doesn’t necessarily fall because demand for the companies’ products is drying up. It can also occur when a company spins off or otherwise divests itself of a business.